MFW Associates, LLC v. Plausteiner et al
OPINION & ORDER re: 89 MOTION for Attachment of Defendants' Real Property in Vermont filed by MFW Associates, LLC; 94 MOTION for Summary Judgment filed by Steven Plausteiner, Susan Plausteiner; 107 MOTION for Summary Judgment filed by MFW Associates, LLC. For the foregoing reasons, the Court grants the Plausteiners' motion for summary judgment, on the ground that this lawsuit is precluded by res judicata. Accordingly, the MFW's m otion for summary judgment is denied, and its motion for an attachment of real property is denied as moot. The Clerk of Court is respectfully directed to terminate the motions pending at Dkts. 89, 94, and 107, and to close this case. SO ORDERED. (Signed by Judge Paul A. Engelmayer on 6/2/2017) (anc)
that claim on a lawsuit that MFW had brought earlier in Vermont state court; they argued that
MFW’s bid there for a deficiency judgment precluded its breach of contract claim here. After a
close analysis of Vermont law regarding deficiency judgments, the Court rejected that claim.
The parties now cross-move for summary judgment. As on the motion to dismiss, the
cross-motions implicate two sets of issues. The first is whether the AFA, either textually or as
now supplemented by extrinsic evidence, establishes that the Plausteiners owe the debt in
question, as MFW argues, or releases them from the duty to pay that debt, as the Plausteiners
argue. The second is whether MFW’s lawsuit here is barred by principles of res judicata, as the
Plausteiners argue, or not, as MFW argues. Significant here, on the cross-motions, the
Plausteiners have changed their basis for arguing res judicata. They now base that claim on the
facts that, in the earlier Vermont lawsuit, MFW brought a breach of contract claim paralleling its
claim here, and that that claim was dismissed with prejudice pursuant to an agreed-upon
For the following reasons, the Court holds that summary judgment to the Plausteiners is
warranted on the basis of res judicata. The Court therefore does not reach the parties’ competing
arguments based on the text of the AFA, and denies MFW’s motion to attach as moot.
The Court draws its account of the underlying facts from the parties’ respective submissions on
their cross-motions for summary judgment, including their Joint Stipulation of Facts, Dkt. 86
(“JSF”), and its attached exhibits; the exhibits attached to the Plausteiners’ memorandum of law
in support of their motion, Dkt. 95 (“Plausteiner Memo”); the Affidavit of Dan Purjes in support
of MFW’s motion, Dkt. 109 (“Purjes Aff.”); MFW’s Rule 56.1 statement of undisputed material
facts in support of its motion, Dkt. 110 (“MFW 56.1”), and its attached exhibits; the exhibits
attached to the Plausteiners’ reply memorandum of law in support of their motion and in
opposition to MFW’s motion, Dkt. 118 (“Plausteiner Reply”); and the Affidavit of Steven
Plausteiner in support of the Plausteiners’ motion, Dkt. 119 (“Plausteiner Aff.”). Citations to a
party’s Rule 56.1 statement incorporate the evidentiary materials cited therein. When facts
stated in a party’s Rule 56.1 statement are supported by testimonial or documentary evidence and
History of the Resort and the Loans Made to It
In 1993, the Plausteiners purchased the Resort, a 750-acre ski and vacation resort in
Brownsville, Vermont, at a foreclosure auction. JSF ¶ 1. Between 1993 and 1997, they were the
sole owners and operators of the Resort; in 1997, they sought to improve and expand the resort
and sought outside financing to do so and, to that end, formed Snowdance LLC (“Snowdance”).
Id. ¶¶ 3–5. The Plausteiners were majority owners and the managers of Snowdance and were its
sole officers and managers until July 2010. Id. ¶ 6. They were also the majority members of
Snowdance Realty LLC (“Realty”), Snowdance Ski Company, LLC (“Ski”), and Snowdance
Hotel Company, LLC (“Hotel”), all formed in 1997, each of which were minority owners of
Snowdance. Id. ¶ 7. The Plausteiners controlled Realty, Ski, and Hotel at all relevant times. Id.
Dan Purjes initially acquired a 25% interest in Snowdance pursuant to a membership agreement
dated May 7, 1998. Id. ¶ 8.
Snowdance obtained various loans to help it make improvements to the Resort. In May
2000, Snowdance sought to purchase a Garaventa CTEC High-Speed Quad Chairlift (the “Lift”).
not denied by the other party, or denied by a party without citation to conflicting admissible
evidence, the Court finds such facts to be true. See S.D.N.Y. Local Civil Rule 56.1(c) (“Each
numbered paragraph in the statement of material facts set forth in the statement required to be
served by the moving party will be deemed to be admitted for purposes of the motion unless
specifically controverted by a correspondingly numbered paragraph in a statement required to be
served by the opposing party.”); id. Rule 56.1(d) (“Each statement by the movant or opponent
. . . controverting any statement of material fact must be followed by citation to evidence
which would be admissible, set forth as required by Fed. R. Civ. P. 56(c).”).
The Court draws upon the materials submitted as part of the briefing on MFW’s motion to attach
when helpful to aid in setting forth the background of this case. In considering that motion, the
Court reviewed various submissions, including the exhibits attached to MFW’s memorandum of
law, Dkt. 90; the Affidavit of Dan Purjes in support of MFW’s motion, Dkt. 93; the Affidavit of
Steven Plausteiner in opposition, Dkt. 99; and the Reply Affidavit of Dan Purjes in support of the
motion, Dkt. 102.
Id. ¶ 10. The purchase price of the Lift was $2.4 million but Snowdance was able to finance only
$1.4 million. Id. To pay for the Lift, Purjes loaned Snowdance a $1 million bridge loan,
evidenced by a promissory note dated May 18, 2000 and executed by Snowdance. Id. ¶ 11.
The $4.5 Million PRIF Loan and Snowdance’s Default
Later, Snowdance obtained a $4.5 million loan from the Palisades Regional Investment
Fund (PRIF Ascutney, LLC) (the “PRIF Loan”), pursuant to a promissory note dated May 19,
2005. Id. ¶¶ 14–15. The Plausteiners personally guaranteed the PRIF Loan and agreed to put a
mortgage on their personal residence on Coaching Lane in Brownsville, Vermont as additional
collateral for that loan, which was memorialized in a Guaranty Agreement dated May 19, 2005.
Id. ¶ 16. PRIF also required the Plausteiners (along with Realty, Ski, and Hotel) to pledge their
membership interests in Snowdance to PRIF in the event of a default on the PRIF Loan. Id. ¶ 18.
This agreement was memorialized in a Financial Interest Pledge and Security Agreement dated
May 19, 2005 (the “Pledge Agreement”). Id. The PRIF Loan documents included documents
totaling 457 pages (the “Transaction Documents”). Id. ¶ 19. Under a separate agreement dated
May 19, 2005 with a different lender, Textron Financial Corporation (“Textron”), PRIF received
a first priority mortgage on the Resort’s real property. Id. ¶¶ 12–13, 20.
In or around December 2007, Snowdance defaulted on its obligations under the PRIF
Loan and PRIF began foreclosure proceedings. Id. ¶ 21. PRIF then agreed to forbear
enforcement of its rights in connection with Snowdance’s default for a period of time; this was
reflected in a Forbearance Agreement dated December 2007. Id. ¶ 22. In or around February
2008, however, Snowdance defaulted on the Forbearance Agreement, and PRIF resumed its
foreclosure action on the PRIF Loan. Id. ¶ 23. But, on June 30, 2008, Snowdance entered into a
second Forbearance Agreement with PRIF. Id. ¶ 24.
The Assignment to MFW and the AFA
In or around September 2008, Steven Plausteiner met with Purjes at Purjes’s home in
New York City to discuss ways to pay off the PRIF Loan. Id. ¶ 27. The balance of the PRIF
Loan at that time was about $2.35 million but had been negotiated to $1.85 million on the
condition that the amount be paid immediately in cash. Id. ¶ 28. Purjes and Steven Plausteiner
then reached an understanding about purchasing the remaining balance of the PRIF Loan. Id.
Under this agreement, the Plausteiners agreed to pay $1 million to PRIF, in exchange for
which the Plausteiners would receive a preferred membership interest of $1 million that would
be senior to all other equity interests in Snowdance. Id. ¶ 30. Purjes agreed to purchase the
remainder of the PRIF Loan through MFW, a company he would establish for this purpose, on
the condition that MFW would take the place of PRIF and assume its first priority lienholder
position with respect to the Resort’s real property, along with holding a senior preferred equity
position in Snowdance. Id. ¶ 31. As a result, the Plausteiners’ payment to PRIF was unsecured,
instead being in exchange for a senior preferred equity position in Snowdance. Id. The
Plausteiners demanded, however, as consideration for the payment to PRIF, that MFW release
the mortgage on the Plausteiners’ personal residence on Coaching Lane, which had been part of
the security for the PRIF Loan, and MFW agreed to do this. Id. ¶ 32.
To execute this agreement, Purjes formed MFW in October 2008. Id. ¶ 34. At all
relevant times since, Purjes has served as its managing member. Id. The Plausteiners, in
October 2008, paid $1 million to PRIF to reduce the balance of the PRIF Loan. Id. ¶ 35. And,
on October 10, 2008, MFW purchased the PRIF Loan and PRIF’s interest was assigned to it such
that MFW stood in the shoes of PRIF with respect to the PRIF Loan and the Forbearance
Agreement. Id. ¶ 36. In connection with MFW’s purchase of the PRIF Loan, as a condition of
MFW’s forbearance, MFW drafted and entered into new pledge agreements dated October 10,
2008 with the Plausteiners and with Realty, Hotel, and Ski, each of whom pledged their equity
interests to secure the PRIF Loan. Id. ¶ 37; MFW 56.1 ¶ 24 & Ex. 10 (Dkt. 110-10) (the “MFW
On October 10, 2008, MFW, now the assignee of the obligations due under the PRIF
Loan, entered into a new forbearance agreement with Snowdance, the Plausteiners, Realty,
Hotel, and Ski, titled “Amendment No. 1 to the Forbearance Agreement dated June 30, 2008”
(the “AFA”). Id. ¶ 38. The AFA—a key document here—extended the forbearance period for
payments due under the PRIF Loan to October 1, 2009. Id. ¶ 39 & Ex. 1 (“AFA”).
The AFA states that it was entered into “by and between” the following parties:
MFW ASSOCIATES, LLC . . . (the “Lender”), who is the successor
and assignee of PRIF ASCUTNEY, LLC (“PRIF”), and
SNOWDANCE LLC . . . (the “Borrower”), STEVEN
PLAUSTEINER . . . , SUSAN PLAUSTEINER . . . (each
sometimes referred to herein as a “Guarantor” individually, jointly
and severally as the “Guarantors”), SNOWDANCE SKI
COMPANY, . . . SNOWDANCE HOTEL COMPANY, . . .
SNOWDANCE REALTY COMPANY, . . . STEVEN
PLAUSTEINER and SUSAN PLAUSTEINER, (collectively, the
“Pledgors”, and together with the Borrower and the Guarantors, are
referred to herein as the “Debtor”).
AFA at 1. The AFA provides that it “shall be deemed incorporated into and made part of the
Transaction Documents.” Id. § 10. The AFA defines the Transaction Documents to encompass
the PRIF Loan and the associated promissory note, the agreement for the sale of the PRIF Loan
to MFW and the associated assignment, and “all instruments, documents, mortgages, forbearance
agreements and other agreements executed in connection therewith or related thereto, and
amendments modifications, or supplements thereto.” AFA ¶ 1.
Section 5(a) of the AFA provides that, to satisfy the obligations under the PRIF Loan,
“Debtor shall pay” to MFW, by October 1, 2009, the reduced amount of $850,000.00, plus 20%
interest calculated from the date of the agreement and the date of payment, plus reasonable fees,
costs, and expenses incurred by MFW as a result of enforcement of the Transaction Documents
between the date of the agreement and date of payment. AFA § 5(a). But, if the Debtor did not
pay that reduced amount by October 1, 2009, § 5(b) provides that MFW’s agreement to accept
the reduced balance would become “null and void,” and “Debtor shall pay to [MFW] the entire
outstanding Debt . . . which shall become due and payable immediately,” which includes “all
accrued and unpaid interest thereon to date, plus all fees, costs, and expenses.” AFA § 5(b).
Section 5(b) provides that “Debtor also acknowledges that it is obligated to pay any additional
legal fees incurred by [MFW] through the collection of the entire indebtedness owed by Debtor
pursuant to the terms of the Transaction Documents.” AFA § 5(b).
The AFA also released the mortgage on the Plausteiners’ personal residence that had
served as part of the security for the PRIF Loan. AFA § 8(e). The AFA also called for the
execution of the MFW Pledge Agreements, under which the Plausteiners and Realty, Hotel, and
Ski would pledge their membership interests in Snowdance to MFW: Section 8(a) provides that
the Debtor “shall executed [sic] and deliver to [MFW] Limited Liability Membership Pledge
Agreements from Steven Plausteiner, Susan Plausteiner, [Ski], [Hotel], and [Realty] pledging all
of the limited liability common membership interests owned by each person or entity in
Snowdance.” Id. § 8(a). Additionally, § 8(e) provides that
[MFW] hereby releases Guarantors, Steven and Susan Plausteiner,
from their obligations under the Transaction Documents and from
any guaranty relating in any way to the Transaction Documents,
including but not limited to, (i) the Guaranty dated May 19, 2005
given by the Guarantors in favor of PRIF and (ii) the Limited
Guaranty dated May 19, 2005 given by the Guarantors in favor of
PRIF (together the “Guarantees”). The Guarantees are hereby
terminated and of no further force or effect. Furthermore, this
release shall also apply to the mortgage deed granted by Guarantors
to Lender for the real property situated at 701 Coaching Lane,
Brownsville, Vermont, and Lender agrees to take all reasonable
actions necessary to cause such mortgage deed to be released and
for such release to be recorded in the appropriate governmental
offices. This release shall only apply to Guarantors.
Id. § 8(e).
Snowdance’s Default on Its Obligations Under the AFA and MFW’s
Reinstitution of the Vermont Foreclosure Action
Snowdance later defaulted on its payments due under the AFA. See JSF ¶ 46. MFW
then reinstituted the foreclosure proceeding previously begun by PRIF in Vermont state court
(the “Vermont Foreclosure Action”). Id. The original PRIF complaint and PRIF’s or MFW’s
subsequent complaints named Snowdance and others as defendants; the Plausteiners were not
ever named as defendants. See MFW 56.1, Exs. 7, 11–13.
On January 25, 2010, MFW filed a Supplemental Complaint in the Vermont Foreclosure
Action, in which it sought to foreclose on the membership interests in Snowdance pledged in the
MFW Pledge Agreements by the Plausteiners, Realty, Hotel, and Ski, and, as such, named the
Plausteiners and Realty, Hotel, and Ski as defendants. JSF ¶ 47 & Ex. 2 (“Supplemental
Complaint”). The Supplemental Complaint sought a court order for a judicial sale of the pledged
membership interests. It also alleged that if the sale of the LLC interests in Snowdance was less
than the debt those interests secure, then MFW would be entitled to a deficiency judgment
against the “Guarantors,” which the Supplemental Complaint had defined collectively to include
the Plausteiners, Realty, Hotel, and Ski. Id. ¶¶ 48–50. The Supplemental Complaint also
brought a claim for breach of contract of the AFA. That claim alleged that, “By failing to pay
when due, Snowdance LLC is in breach of [the AFA] and the [original Forbearance Agreement
with PRIF]; it further alleged that, “By failing to pay when due, Guarantors [defined to include
the Plausteiners] are in breach of their Pledge Agreements [defined as the MFW Pledge
Agreements executed in connection with the AFA].” Supplemental Complaint ¶¶ 19, 24–25.
MFW further alleged in its breach of contract count that, “As a result of the breaches, [MFW]
has suffered damages. Moreover, [MFW] is now entitled to foreclose on the property described
in the Pledge Agreements [the Plausteiners’ and Realty’s, Hotel’s, and Ski’s LLC equity interests
in Snowdance].” Id. ¶¶ 19, 26. As relief, MFW sought in the Supplemental Complaint
“compensatory damages” as well as foreclosure and a deficiency judgment. Id. at 6–7 (Claims
for Relief). MFW also sought, as relief, “[a] declaratory judgment that Defendants have
defaulted on their obligations under [the AFA].” Id. at 6 ¶ A. (Claims for Relief).
In sum, the Supplemental Complaint, although styled as “an action to foreclose on
membership interests in Snowdance LLC held by [Realty], [Ski], [Hotel], Steven Plausteiner,
and Susan Plausteiner (collectively, the ‘Guarantors’),” id. ¶ 1, in fact brought three counts: (1)
for breach of the AFA, seeking damages, a declaratory judgment of defendants’ default, and
foreclosure, id. ¶¶ 23–26; (2) for foreclosure, seeking a judicial sale of the membership interests
in Snowdance, id. ¶¶ 27–30; and (3) for a deficiency judgment in the circumstance that “the sale
of the LLC interests in Snowdance is less than the amount of the debt secured by the guarantees
then [MFW] will be entitled to a deficiency against the Guarantors,” id. ¶¶ 31–32.
On or about July 1, 2010, the Plausteiners resigned as managing members of Snowdance.
JSF ¶ 50. On July 27, 2010, Judge Cohen of Vermont Superior Court approved a “Stipulated
Order Approving Plaintiff’s Sale of Snowdance LLC Membership Interests,” a corrected version
of which was approved by Judge Cohen on October 8, 2010. Id. ¶¶ 51–52 & Ex. 3. This
Stipulated Order permitted, as commercially reasonable under Vermont law, a private sale of the
Plausteiners’ and Realty’s, Hotel’s, and Ski’s ownership interests in Snowdance to another
company, UTVT Holdings, Inc. (“UTVT”), for $100, “[i]n light of the significant amounts owed
by Snowdance LLC to its creditors including MFW,” id., Ex. 3 ¶ 3. The Stipulated Order
specifically limited itself to the disposition of those interests. It noted that MFW continued to
pursue, in the Vermont Foreclosure Action, a deficiency judgment against the Plausteiners and
the other parties understood as the “debtor” in the AFA. See id. ¶ 5.
On November 24, 2010, Judge Cohen denied MFW’s motion for summary judgment in
the Vermont Foreclosure Action. JSF ¶¶ 53–54 & Ex. 4. On January 21, 2011, Snowdance, then
owned by UTVT, sought to sell the Lift, making a motion in the Vermont Foreclosure Action to
do so. Plausteiner Memo, Ex. 14 (Dkt. 95-17). On January 21, 2011, MFW assented to the sale
of the Lift, noting that it asserted it believes it is entitled to the proceeds from the sale of the Lift,
as a first mortgagee and first security interest holder, and assented to the proceeds being held by
the court or in escrow pending the court’s determination of who is entitled to the proceeds. Id.,
Ex. 15 (Dkt. 95-18). On February 2, 2011, however, the Plausteiners filed an objection to
Snowdance’s motion to sell the Lift, contending that Snowdance’s claim to sell the Lift for $1.55
million “would gut the value of the Ascutney Resort,” that the Lift was worth significantly more,
and that “[t]he Ascutney resort is still viable, and could be operated, as long as it has adequate
lifts. The motion to sell removes that possibility.” Id., Ex. 16 (Dkt. 95-19 at 3–4).
Later, MFW entered into an agreement with Snowdance, the Plausteiners, and Realty,
Hotel, and Ski” entitled “Joint Stipulation Regarding Motion to Sell Lift and Motion for
Preliminary Injunction” dated February 15, 2011. JSF ¶ 54 & Ex. 5 (the “Joint Stipulation”).
The Joint Stipulation provided for the Plausteiners to withdraw their objection to Snowdance’s
motion to sell the Lift and instead consented to the sale of the Lift as set forth in that motion.
Joint Stipulation ¶ 1. The parties also agreed in the Joint Stipulation that “[t]he Supplemental
Complaint filed in this action shall be dismissed with prejudice.” Id. ¶ 3. On March 21, 2011,
Judge Cohen issued an order approving the Joint Stipulation. It granted Snowdance’s motion to
sell the Lift in accordance with the terms of the Joint Stipulation. The order stated that it was
“based on all parties’ agreement in written stipulation, in accordance with the terms of that
stipulation.” JSF ¶ 55 & Ex. 6.
Foreclosure proceedings continued for the mortgage on the other collateral in the Resort
securing the PRIF Loan. On August 14, 2013, Judge Cohen issued a “Judgment Order and
Decree of Foreclosure by Judicial Sale” in favor of MFW. Id. ¶ 57 & Ex. 7 (“Foreclosure
Judgment Order”). This order noted that after a hearing on July 16, 2013 regarding “amounts
due and priority of liens and security interests,” MFW and Snowdance “stipulated to the amounts
due” and Judge Cohen had approved those amounts and entered judgment in those amounts.
Foreclosure Judgment Order at 1. As such, the Foreclosure Judgment Order provided for a
judgment that Snowdance owed MFW a total of $5,224,187.61, constituted by, inter alia,
$1,320,903.76 in principal and $2,975,762.40 in interest, with $102.435.05 in legal fees. Id. at 2.
The Foreclosure Judgment Order provided for a roughly 30-day period for Snowdance, Realty
(as successor in interest to Textron), Ski, Hotel, the Plausteiners, Purjes, and three other minority
owners of Snowdance to redeem the judgment in full. After a judgment of foreclosure was
entered in favor of MFW, MFW, on or about November 6, 2013, filed a Motion for Order of
Confirmation of Sale. Id. ¶ 58 & Ex. 8. The motion stated that a “public sale of the lands and
premises subject to this foreclosure action” had occurred two days earlier, on November 4, 2013,
and that the highest bidder in the auction had been MFW, which bought the foreclosed property
for $1.5 million. Id., Ex. 8 at 1–2. The motion also stated that MFW “dismisses its claims for
judgment for deficiency.” Id. at 2.
On November 19, 2013, Judge Cohen entered an “Order of Confirmation of Sale.” Id. ¶
59 & Ex. 9 (“Confirmation Order”). That order opened as follows: “This foreclosure action was
filed by Complaint dated March 11, 2008, by MFW ASSOCIATES, LLC’s predecessor [in]
interest to PRIF ASCUTNEY, LLC, against above named defendants,” which the caption listed
as Snowdance, Realty (successor in interest to Textron), Purjes, Hotel, Ski, the Plausteiners, and
the three other minority equity holders of Snowdance. Confirmation Order at 1. The
Confirmation Order continued by noting “[s]ince no defendant redeemed their interest in the
subject lands and premises, a public auction sale of the subject lands and premises was held on
November 4, 2013,” id., and that MFW “was the high bidder at the public sale,” id. ¶ 2. The
Confirmation Order then specified the lands, premises, fixtures, and equipment foreclosed on,
and then stated that the interests of the named defendants in the subject lands and premises had
been foreclosed upon, such that “there is no party defendant whose interest in the subject lands
and premises is superior to the interest of [MFW].” Id. ¶¶ 3–5. It noted that “the judgment
indebtedness as of the date of the sale is $5,296,648.50. The winning bid was $1,500,000.00.
There is no surplus for distribution.” Id. ¶ 6. The Confirmation Order then specified, “Plaintiff
waives any deficiency claim,” and Judge Cohen added a handwritten note, “—However this
waiver excludes the Plaintiff’s award as a priority lien holder of funds currently being held in
escrow from the sale of chairlift. See Nov. 1 2013 order. [Initialed] WDC.” Id. ¶ 7. The
Confirmation Order then confirmed the sale. Id. ¶ 7.c.
On April 2, 2015, MFW filed its Complaint in this Court against the Plausteiners. Dkt. 1
(“Complaint”). It sued in federal court based on diversity jurisdiction, pleading that, for
diversity jurisdiction purposes, MFW is a citizen of Vermont, Utah, and New York, and the
Plausteiners are citizens of Maine. Complaint ¶¶ 1–2; Dkt. 33 ¶¶ 1–4 (“Supplemental Statement
Concerning Jurisdiction”). It alleged that venue is proper in this district because a substantial
part of the events giving rise to MFW’s claims occurred in this district, including negotiations
that led to the AFA between Steven Plausteiner and Purjes at Purjes’s New York City home. Id.
¶¶ 5, 13.
MFW’s Complaint brings one count for breach of contract under the AFA and seeks
damages and costs of not less than $4,002,606.61. Id. ¶¶ 24–28. MFW alleges, in substance,
that after MFW purchased the PRIF Loan and the PRIF Loan was assigned to MFW such that
MFW possessed all of PRIF’s former rights, and after the parties entered into the AFA, the
Plausteiners then failed to pay the amount they owed to MFW under the AFA. Id. ¶¶ 14, 19. It
alleges that (1) AFA § 5(a) required the Plausteiners to pay $850,000, plus interest, before
October 1, 2009, in full satisfaction of the amount owed under the PRIF Loan, and, alternatively,
that (2) under AFA § 5(b), if the Plausteiners failed to timely make the payment as required by
§ 5(a), then MFW’s agreement to accept a reduced amount became nullified, obliging the
Plausteiners to pay to MFW the entire outstanding debt due on the PRIF Loan. Id. ¶¶ 17–18.
MFW’s suit thus sought to collect the amount allegedly due under the AFA—the full outstanding
amount of the PRIF Loan—that the Plausteiners failed to pay.
The Plausteiners’ Motion to Dismiss
On May 15, 2015, the Plausteiners answered. Dkts. 6, 8. They asserted as affirmative
defenses, inter alia, that MFW had failed to state a claim and that its lawsuit was barred by the
doctrines of collateral estoppel and res judicata. E.g., Dkt. 6, ¶¶ 29, 33.
On June 3, 2015, the Plausteiners moved to dismiss, making two arguments. Dkt. 19.2
First, although not pursuing the point in their opening brief, they ultimately argued that MFW’s
breach of contract claim was barred by res judicata. They argued that the Vermont foreclosure
proceedings, in which MFW had foreclosed on assets securing the PRIF Loan, precluded MFW’s
current claim. This was so, they argued, because (1) the Vermont Foreclosure Action resulted in
a final adjudication on the merits via the dismissal of the Supplemental Complaint with prejudice
pursuant to the Joint Stipulation and (2) MFW’s claim here—that the Plausteiners are personally
liable on the debt due under the AFA—arose from the same events. The Plausteiners argued that
the Supplemental Complaint raised the issue of whether they were personally liable under the
AFA, and that MFW forewent that claim when it agreed to dismissal of the Supplemental
Complaint with prejudice. And, the Plausteiners argued, even if MFW’s claims here had not
raised in the Vermont action, they should have been. Second, on the merits, the Plausteiners
argued that MFW failed to state a claim for breach of contract, because, as the Plausteiners read
the AFA, it expressly released them from all obligations to repay the PRIF Loan.
The Plausteiners styled their motion as under Federal Rule of Civil Procedure 12(b)(6), but this
was incorrect, because such a motion “must be made before pleading if a responsive pleading is
allowed,” Fed. R. Civ. P. 12(b), whereas the Plausteiners had answered the Complaint before
moving to dismiss. The proper motion for them therefore was for judgment on the pleadings
under Rule 12(c). See Fed. R. Civ. P. 12(c); Fed. R. Civ. P. 12(h)(2)(B); In re Livent Sec. Litig.,
193 F. Supp. 2d 750, 753 (S.D.N.Y. 2002). Because their motion could have been brought under
Rule 12(c), and because a court may “simply treat the motion as if it were a motion to dismiss,”
Nat’l Ass’n of Pharm. Mfrs., Inc. v. Ayerst Labs., 850 F.2d 904, 909 n.2 (2d Cir. 1988), the Court
construed the Plausteiners’ motion as under Rule 12(c), see id.
MFW responded that the Vermont Foreclosure Action did not preclude its claim here
because it was a foreclosure action. Under Vermont law, MFW noted, such an action does not
preclude a later action on the underlying debt, whether brought as a deficiency claim or a claim
for breach of contract. MFW argued that it had not litigated the Plausteiners’ personal liability
on the debt, and that the Joint Stipulation did not preclude such claims. MFW further argued that
the foreclosure in Vermont was against property held by Snowdance, not by the Plausteiners, so
the waiver of deficiency claims in the Confirmation Order barred only such claims against
Snowdance. On the merits, MFW also countered the Plausteiners’ reading of the AFA to release
them from all liability.
On March 24, 2016, the Court, in a lengthy decision, denied the Plausteiners’ motion to
dismiss on both grounds. Dkt. 52 (“MTD Decision”). As to res judicata, the Court held that (1)
the Supplemental Complaint and the Joint Stipulation came close to, but ultimately did not,
satisfy res judicata because there had never been a judicial sale of the pledged collateral that
could make a resulting deficiency claim possible, and (2) the Foreclosure Judgment Order and
Confirmation Order waived deficiency claims only against Snowdance, not against the
Plausteiners. As to the AFA, the Court held that the AFA did not unambiguously release the
Plausteiners from all liability on the PRIF Loan. Instead, the Court noted, the Plausteiners had
entered into the AFA in multiple capacities, but AFA § 8(e) appeared to release them from
liability on the PRIF Loan in only one: as loan guarantors. As a result, at the pleading stage,
AFA § 8(e) could not be read to release the Plausteiners from global liability on that loan. The
Court left open the possibility of discovery to explore any possible ambiguity on this point.3
On May 4, 2016, the Plausteiners moved for leave to add a counterclaim, Dkt. 64, which, on
May 6, 2016, the Court granted, Dkt. 66; on August 2, 2016, the Plausteiners filed an amended
answer and counterclaim against MFW for fraudulent inducement, Dkt. 71. On August 12,
The Motions for Summary Judgment
On September 8, 2016, the Court set a schedule for summary judgment briefing. Dkt. 81,
later modified at the parties’ request, Dkt. 105. On October 13, 2016, MFW and the Plausteiners
filed the JSF, Dkt. 86, which attached exhibits. On October 28, 2016, the Plausteiners filed their
motion for summary judgment, Dkt. 94, including the Plausteiner Memo, Dkt. 95, in support,
which attached various exhibits. On November 21, 2016, MFW filed its motion and opposition
to the Plausteiners’ motion, Dkt. 107, and included, in support, a memorandum of law, Dkt. 108
(“MFW Memo”), and the Purjes Aff., Dkt. 109, and the MFW 56.1, Dkt. 110, which attached
various exhibits. On December 9, 2016, the Plausteiners filed the Plausteiner Reply in support of
their motion and in opposition to MFW’s motion, Dkt. 118, and attached several exhibits, and
filed the Plausteiner Aff., Dkt. 119. On December 19, 2016, MFW filed a reply. Dkt. 121.
The Plausteiners primarily argue for summary judgment based on res judicata, although
they separately make an argument for release by the AFA. Significantly, the Plausteiners have
refined their res judicata argument. They now focus on the fact that MFW—separate and apart
from its claims for foreclosure and for a deficiency judgment—brought a breach of contract
claim in the Supplemental Complaint in Vermont, based on the AFA, which was dismissed with
prejudice in Vermont. Because MFW here sues the Plausteiners for damages for breach of the
AFA, they argue, res judicata bars this case. The Plausteiners separately pursue res judicata on
the ground that the pledged collateral (the membership interests in Snowdance) had in fact been
2016, MFW filed a motion to dismiss the counterclaim, see Dkts. 72, 77, which the Plausteiners
opposed, Dkt. 73. On March 16, 2017, the Court granted MFW’s motion to dismiss the
counterclaim, because it failed to allege misrepresentations of present fact, as opposed to a future
intention not to perform, and because it was untimely. Dkt. 123.
sold by the time of the Confirmation Order. Thus, they argue, dismissal of MFW’s deficiency
claim can have preclusive effect under Vermont law.
MFW counters that the Plausteiners have waived any right to pursue res judicata based
on theories not raised in the motion to dismiss, such as based on MFW’s breach of contract claim
in Vermont. And, MFW argues, the Plausteiners’ bid for res judicata based on the dismissal in
Vermont of MFW’s deficiency claim fails substantially for the reasons given by the Court in
denying the motion to dismiss. The deficiency claim, MFW argues, was not ripe at the time the
Supplemental Complaint was dismissed with prejudice, because the foreclosure sale of the
collateral that secured the AFA had not yet occurred, and under Vermont law, a claim for a
deficiency judgment cannot be brought until the existence and amount of the deficiency are
determined by sale of the collateral after foreclosure. Moreover, MFW argues, the amount of a
deficiency judgment could not have been determined at that time because various other collateral
remained to be sold. MFW separately seeks summary judgment in its favor based on its
construction of the AFA to maintain, not release, the Plausteiners’ liability for the PRIF Loan in
their capacity as a “Debtor.”
The Plausteiners seek summary judgment mostly based on res judicata. As the parties
appear to agree, this issue can be resolved on summary judgment, as it is based on the record of
the Vermont litigation, which has now been presented more fully to this Court. For the reasons
that follow, the Court holds that the Plausteiners are entitled to judgment as a matter of law based
on their reformulated theory of res judicata, which relies on the fact that MFW earlier brought a
breach of contract claim in Vermont that was dismissed with prejudice. The Court thus has no
occasion to revisit or to resolve the Plausteiners’s alternative grounds for claiming res judicata,
or to resolve the parties’ competing arguments for summary judgment based on the AFA.
Legal Standards Governing Motions for Summary Judgment
To prevail on a motion for summary judgment, the movant must “show that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). The movant also bears the burden of demonstrating the absence of a
question of material fact. In making this determination, the Court must view all facts “in the
light most favorable” to the non-moving party. Holcomb v. Iona Coll., 521 F.3d 130, 132 (2d
Cir. 2008); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
If the movant meets its burden, “the nonmoving party must come forward with
admissible evidence sufficient to raise a genuine issue of fact for trial in order to avoid summary
judgment.” Jaramillo v. Weyerhaeuser Co., 536 F.3d 140, 145 (2d Cir. 2008). “[A] party may
not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion
for summary judgment.” Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (internal quotation
marks and citation omitted). Rather, the opposing party must establish a genuine issue of fact by
“citing to particular parts of materials in the record.” Fed. R. Civ. P. 56(c)(1)(A); see also
Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009).
“Only disputes over facts that might affect the outcome of the suit under governing law”
will preclude a grant of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). In determining whether there are genuine issues of material fact, the Court is “required
to resolve all ambiguities and draw all permissible factual inferences in favor of the party against
whom summary judgment is sought.” Johnson v. Killian, 680 F.3d 234, 236 (2d Cir. 2012)
(quoting Terry v. Ashcroft, 336 F.3d 128, 137 (2d Cir. 2003)) (internal quotation marks omitted).
Legal Standards Governing Claims of Res Judicata
“Under the doctrine of res judicata, or claim preclusion, ‘a final judgment on the merits
of an action precludes the parties or their privies from relitigating issues that were or could have
been raised in that action.’” Flaherty v. Lang, 199 F.3d 607, 612 (2d Cir. 1999) (quoting Rivet v.
Regions Bank of La., 522 U.S. 470, 476 (1998)) (emphasis omitted); see also Federated Dep’t
Stores, Inc. v. Moitie, 452 U.S. 394, 398 (1981). Res judicata (claim preclusion) is distinct from
the related doctrine of collateral estoppel (issue preclusion), which “refers to the preclusive effect
of a judgment that prevents a party from litigating, for a second time, an issue of fact or law that
has once been decided.” Yeiser v. GMAC Mortgage Corp., 535 F. Supp. 2d 413, 421 (S.D.N.Y.
2008). “The defense of res judicata . . . may be brought, under appropriate circumstances, either
via a motion to dismiss or a motion for summary judgment.” Sassower v. Abrams, 833 F. Supp.
253, 264 n.18 (S.D.N.Y. 1993).
Judgments on the merits entered by state courts have preclusive effect in federal courts.
Gianatasio v. D’Agostino, 862 F. Supp. 2d 343, 348 (S.D.N.Y. 2012) (citing the Full Faith and
Credit Clause of the United States Constitution, Art. IV, § 1, and the full faith and credit statute,
28 U.S.C. § 1783). A federal court’s determination of the res judiciata preclusive effect of a
judgment entered by a state court is governed by “the preclusion law of the State in which the
judgment was rendered.” Marrese v. Am. Academy of Orthopaedic Surgeons, 470 U.S. 373, 380
(1985) (discussing the full faith and credit statute); see also Giannone v. York Tape & Label,
Inc., 548 F.3d 191, 192–93 (2d Cir. 2008) (“When determining the effect of a state court
judgment, federal courts, including those sitting in diversity, are required to apply the preclusion
law of the rendering state.” (internal quotation marks, citations, and alterations omitted)).
Under Vermont law, “under the doctrine of res judicata, or ‘claim preclusion, a final
judgment in previous litigation bars subsequent litigation if the parties, subject matter, and
cause(s) of action in both matters are the same or substantially identical.’ The doctrine ‘bars
parties from relitigating, not only those claims and issues that were previously litigated, but also
those that could have been litigated in a prior action.’” Nat. Res. Bd. Land Use Panel v. Dorr,
113 A.3d 400, 403 (Vt. 2015) (citation omitted) (quoting Faulkner v. Caledonia Cty. Fair Ass’n,
869 A.2d 103, 107 (Vt. 2004), and Carlson v. Clark, 970 A.2d 1269, 1273 (Vt. 2009)); see also
Russell v. Atkins, 679 A.2d 333, 335 (Vt. 1996) (res judicata “bars not only issues actually
litigated but also those which ‘should have been raised in previous litigation” (quoting Berlin
Convalescent Center, Inc. v. Stoneman, 615 A.2d 141, 143–44 (Vt. 1992)).
Under Vermont law, whether an action could or should have been raised in a prior
litigation is determined using two tests; if either applies, the claim is barred by res judicata. The
first test asks whether the causes of action in the two lawsuits are the same, which in turn is
defined by whether the evidence needed to sustain the second action would have sustained the
first. The second, more modern test, asks whether the claims in the two lawsuits arise from the
same “transaction or occurrence.” See Faulkner, 869 A.2d at 108–09. That inquiry is broader.
It requires “a plaintiff to address in one lawsuit all injuries emanating from all or any part of the
transaction, or series of connected transactions, out of which the action arose.” Id. (citing
Restatement (Second) of Judgments § 24(1) (1982)). Under this test, the scope of a
“‘transaction’ is determined by ‘giving weight to such considerations as whether the facts are
related in time, space, origin, or motivation, whether they form a convenient trial unit, and
whether their treatment as a unit conforms to the parties’ expectations or business understanding
or usage”; no single factor is controlling. Id. at 109 (quoting Restatement (Second) of Judgments
§ 24(2)). “[E]ven when there is not a substantial overlap [between proofs relevant to two
actions], the second action may be precluded if it stems from the same transaction.” Id.
(alteration in Faulkner; quoting Restatement (Second) of Judgments § 24 cmt. b.). “Thus, it
follows from this flexible definition that ‘where one act causes a number of harms to, or invades
a number of different interests of the same person, there is still but one transaction.’” Id.
(quoting Restatement (Second) of Judgments § 24 cmt. c.).
As Vermont courts have explained, the doctrine of res judicata serves two purposes: “to
protect the courts and the parties from the burden of relitigation,” Russell, 679 A.2d at 335, and
to protect the integrity and finality of the judgments entered, Nat. Res. Bd., 113 A.3d at 403
(“Requiring the litigation of all claims that could or should have been raised between the parties
precludes later rulings that might ‘nullify the initial judgment or . . . impair rights established in
the initial action.’” (quoting Carlson, 970 A.2d at 1274) (ellipses in Nat. Res. Bd.)); see also
Pomfret Farms Ltd. P’ship v. Pomfret Assocs., 811 A.2d 655, 659 (Vt. 2002) (“[I]nvocation of
res judicata . . . relieves parties of the cost and vexation of multiple lawsuits, conserves judicial
resources, and, by preventing inconsistent decisions, encourages reliance on adjudication.”
(quoting Kremer v. Chem. Constr. Corp., 456 U.S. 461, 467 n.6 (1982)) (internal quotation
marks omitted) (alterations in Pomfret)).
Standards Applicable Under Vermont Law to Foreclosure Actions
As the Court noted in denying the Plausteiners’ motion to dismiss, Vermont’s res
judicata doctrine has distinct features to the extent that the suit claimed to have preclusive effect
was a foreclosure action. A lawsuit to foreclose on property—an action in rem—does not bar a
later suit on the underlying note or obligation—an action in personam. LaFarr v. Scribner, 549
A.2d 651, 652–53 (Vt. 1988) (“[I]f foreclosure of the mortgaged premises is insufficient to
satisfy a debt secured by such mortgage, then the creditor’s recourse is through an action on the
note, which is an action in personam.”). As the Vermont Supreme Court explained in LaFarr, a
foreclosure action has more limited preclusive effect: “The issues raised in a foreclosure action
include the validity of the mortgage, the amount of indebtedness due on the mortgage, and the
right of the mortgagee to seek satisfaction of the indebtedness from the mortgaged property. A
judgment and decree of foreclosure will bar litigation of those issues in another action by virtue
of the doctrine of res judicata.” Id. at 653. But it does not preclude an ensuing action to collect
the deficiency still owed on the underlying note following foreclosure. Id. at 652 n.*, 653; see
also MTD Decision at 21–27.4
Analysis of the Plausteiners’ Claim of Res Judicata
Earlier in this litigation, the Plausteiners based their argument for res judicata on the fact
that MFW’s Supplemental Complaint in Vermont state court brought a claim for a deficiency
judgment alongside its claim for foreclosure of the membership interests in Snowdance held by
the Plausteiners (as well as those held by Realty, Hotel, and Ski). The Court rejected that bid.
Although viewing the Plausteiners’ motion as presenting a close question, the Court recognized
that, under Vermont case law including LaFarr, the lack of a judicial sale of the assets at issue
made a deficiency judgment unavailable. MFW’s bid for a deficiency judgment therefore was
not tenable as a basis for invoking res judicata.
As discussed in this Court’s decision denying the motion to dismiss, these principles were
applied in Cowles v. Sunshine, 2005 Vt. Super. LEXIS 26 (Vt. Super. Ct. Chittenden Cty. June
23, 2005), rejecting a claim of preclusion on the ground that a foreclosure action does not bar an
action for deficiency but instead “sets the stage for a deficiency action.” Id. at *2; see also MTD
Decision at 19–20.
In pursuing summary judgment, the Plausteiners have revised the theory on which they
claim res judicata. They now emphasize that MFW’s Supplemental Complaint in the Vermont
foreclosure action included a breach of contract claim against the Plausteiners. Because that
complaint was dismissed with prejudice, the Plausteiners argue, res judicata bars MFW from
bringing a breach of contract claim here. Examining this new argument based upon the fuller
record of the Vermont litigation that has now been presented, the Court agrees. Res judicata
does bar this lawsuit, because the Supplemental Complaint actually brought—and in any event,
certainly could and should have contemporaneously—brought claims against the Plausteiners for
breach of the AFA.
At the outset, the Court rejects MFW’s claim that the Plausteiners have waived their right
to pursue their present theory of res judicata. To be sure, the manner of the Plausteiners’ pursuit
of that defense has been fragmented. The Plausteiners raised res judicata as a defense in their
answer, but, in moving to dismiss, they pursued res judicata only belatedly (in their reply brief)
and incompletely (relying on MFW’s deficiency and foreclosure claims in Vermont, not, as now,
on MFW’s breach of contract claim in that litigation). Judicial economy would have been better
served had the Plausteiners raised at the earliest possible opportunity all bases for claiming res
judicata, while providing the Court with a comprehensive account of the Vermont litigation.
MFW, however, recites no case law that deprives the Court of discretion to consider this
defense at this stage. The rules are to the contrary, as the primary means to objecting on the
ground of insufficiency to a defense that has been asserted in an answer or other responsive
pleading is a motion to strike under Federal Rule of Civil Procedure 12(f), a motion MFW has
not made and that the Court declines to raise sua sponte, see Fed. R. Civ. P. 12(f)(a). Further,
“[r]ulings of the district court are subject to revision by that court ‘at any time before the entry of
final judgment. . . .’” Rezzonico v. H & R Block, Inc., 182 F.3d 144, 148 (2d Cir. 1999) (quoting
Fed. R. Civ. P. 54(b)). And, while MFW has its counterarguments, strong considerations of
fairness and efficiency, on balance, favor considering this potentially dispositive defense on its
merits rather than treating it as waived. MFW, too, is equally responsible with the Plausteiners
for the parties’ joint failure, until now, to present the Court with a full, as opposed to disjointed,
account of that litigation.
On the merits of the res judicata defense, to the extent based on MFW’s breach of
contract claim in the Vermont litigation, the pertinent facts are as follows. After PRIF had
pursued foreclosure on the mortgage securing the PRIF Loan based on Snowdance’s default of
that mortgage and on the Forbearance Agreement, MFW, as PRIF’s successor, entered into the
AFA with Snowdance, the Plausteiners, Realty, Hotel, and Ski. In connection with the AFA, the
Plausteiners, Hotel, and Ski executed pledge agreements—the MFW Pledge Agreements—in
which they pledged their equity and membership interests in Snowdance as security for the AFA.
See AFA § 8(a); MFW Pledge Agreements. Snowdance then defaulted on the first payment due
under the AFA. And, on January 25, 2010, MFW filed the Supplemental Complaint in the
Vermont Foreclosure Action. It sought to foreclose on the membership interests in Snowdance
pledged by the Plausteiners and Realty, Hotel, and Ski.
Significant here, MFW also brought claims for breach of contract against all defendants,
including the Plausteiners. And various allegations in the Supplemental Complaint, as to both
liability and damages, reflected this aspect of its claims. MFW there brought a claim for breach
of contract against Snowdance, based on the AFA, alleging that “[b]y failing to pay when due,
Snowdance LLC is in breach of [the AFA].” Supplemental Complaint ¶ 24. MFW also brought
a claim for breach of contract against the Plausteiners, Realty, Hotel, and Ski, based on the MFW
Pledge Agreements, alleging that “[b]y failing to pay when due, Guarantors are in breach of their
Pledge Agreements.” Id. ¶ 25.5 As to both claims, MFW alleged that: “As a result of the
breaches, [MFW] has suffered damages.” Id. ¶ 26. As to the amount of Snowdance’s default as
a result of its breach, the Supplemental Complaint alleged: “As of December 31, 2009,
Snowdance was in default [of the AFA] and owed $1,789,476 plus interest, late fees, attorneys’
fees and other costs.” Id. ¶ 18. And as to the other defendants, MFW alleged as to damages: “In
each Pledge Agreement, each Guarantor [defined to include the Plausteiners and Realty, Hotel,
and Ski] guaranteed the underlying debt of Snowdance” in addition to granting a security interest
in their equity interests in Snowdance. Id. ¶ 19. Consistent with its theory of contract breach,
MFW’s Supplemental Complaint sought remedies including “compensatory damages.” Id. at
6 ¶ C. (Claims for Relief). It further alleged that MFW “is now entitled to foreclose on the
property described in the Pledge Agreements.” Id. ¶ 26. MFW did not distinguish among the
defendants when it sought “[a] declaratory judgment that Defendants have defaulted on their
obligations under the [AFA].” Id. at 6 ¶ A. (Claims for Relief).
To be sure, the Supplemental Complaint brought other claims: for foreclosure against the
Plausteiners for the equity interests in Snowdance they had pledged in the MFW Pledge
Agreements and a judicial sale of those interests, id. ¶¶ 27–30, and for a deficiency judgment in
the event that “the sale of the LLC interests in Snowdance is less than the amount of the debt
secured by the guarantees then [MFW] will be entitled to a deficiency judgment against the
The MFW Pledge Agreements define as an event of default “[t]he failure of the Borrower to
pay promptly when due any sums payable on the [PRIF Loan] Note and other Loan Documents
or any of the other Lender Obligations.” MFW Pledge Agreements § 7(a); see also id. ¶ 1
(defining “Borrower” as the “Pledgor” (defined as the Plausteiners, Realty, Hotel, and Ski) and
Snowdance); ¶ 6 (defining the “Loan Documents” as the PRIF Loan note and the MFW Pledge
Guarantors,” id. ¶¶ 31–32.6 But these claims were only part of MFW’s complaint. Indeed, the
first of its three causes of action was for breach of contract, seeking compensatory damages. The
second and third were, respectively for foreclosure and judicial sale of the Snowdance
membership interests and for a deficiency judgment under V.R.C.P. 80.1(j)(2) in the event the
sale of the membership interests netted less than the amount of the debt owed under the AFA.
As noted, the parties—after a dispute arose over whether the Lift should be sold, with the
Plausteiners filing objections to the sale—entered into the Joint Stipulation. It reflected the
parties’ agreement about the sale of the Lift and provided that the Supplemental Complaint “shall
be dismissed with prejudice.” Joint Stipulation ¶ 3. Judge Cohen approved the Joint Stipulation,
in accordance with its terms. JSF, Ex. 6.
In light of MFW’s claims against the Plausteiners sounding in breach of contract, the
Supplemental Complaint and the Joint Stipulation meet the requirements of res judicata.
First, the Joint Stipulation dismissing the Supplemental Complaint with prejudice
qualifies as an adjudication on the merits for res judicata purposes. See Russell, 679 A.2d at 335
(settlement including dismissal with prejudice binds parties as an adjudication on the merits)
(citing Littlefield v. Town of Colchester, 552 A.2d 785, 786 (Vt. 1988)).
Second, the parties are identical in this action and in the Supplemental Complaint: In
each, MFW was the plaintiff and the Plausteiners were defendants.
As a remedy on this claim, MFW sought various findings and permission to conduct a sale of
the equity interests, along with a “[j]udgment to [MFW] for all sums due and to become due”
and “[a] deficiency judgment pursuant to V.R.C.P. 80.1(j)(2),” id. at 6 ¶¶ G.–H. (Claims for
Third, the subject matter of the prior suit is the same as in this one: The cases involve the
same transaction documents, namely the AFA and the MFW Pledge Agreements executed in
connection with the AFA.
Finally, the two lawsuits contain the same relevant causes of action—in both, MFW
brought a claim for breach of contract based on the AFA and sought compensatory damages.
The Plausteiners’ theory of res judicata, as now recast, thus lacks the shortcoming of the
theory they pursued earlier. Unlike MFW’s claim for a deficiency judgment in the Supplemental
Complaint—which could not be ripe until the amount of any deficiency had been determined by
a foreclosure sale of the pledged collateral and therefore under Vermont law could not be the
basis for a finding of res judicata—MFW’s breach of contract claim in Vermont state court was
ripe for resolution then and there. MFW in that litigation claimed that compensatory damages
were then due it from the Plausteiners, asserting that, “[i]n each of the Pledge Agreements, each
Guarantor [including the Plausteiners] guaranteed the underlying debt of Snowdance,” id. ¶ 19.
In opposing the Plausteiners’ motion for summary judgment, MFW only scantly attempts
to rebut the Plausteiners’ reformulated res judicata theory. Instead, MFW mostly argues for
waiver or responds to the Plausteiners’ earlier res judicata theory. To the limited extent MFW
engages at all with the Plausteiners’ new theory based on MFW’s breach of contract claim in
Vermont, MFW seeks to distinguish the contract claims in Vermont from that here. Whereas
MFW’s Supplemental Complaint in Vermont asserted that Snowdance had breached the AFA
and that the Plausteiners had breached the Pledge Agreements, here, MFW notes, its claim is that
the Plausteiners breached the AFA. For two reasons, however, that distinction is unpersuasive as
a basis for opposing the claim of res judicata. First, res judicata applies to claims that could or
should have been brought based on the same transaction or occurrence. MFW easily could, and
should, have brought its claim for breach of the AFA against the Plausteiners alongside its claim
for breach of the Pledge Agreements. These sequential and closely related agreements are part
of the same occurrence and series of events, which together gave rise to Snowdance’s default of
the AFA. As the Second Circuit instructs, “it is the facts surrounding the transaction or
occurrence which operate to constitute the cause of action, not the legal theory upon which a
litigant relies,” Saud v. Bank of New York, 929 F.2d 916, 919 (2d Cir. 1991) (quotation omitted).
Second, the Supplemental Complaint is easily read to assert claims against the Plausteiners for
breach of the AFA: As relief there, MFW sought a declaratory judgment that “Defendants”—
which included the Plausteiners—“have defaulted on their obligations under the [AFA],” id. at
6 ¶ A. (Claims for Relief). And the count in which MFW pleads Snowdance’s and the
Plausteiners’ breaches of the AFA and the Pledge Agreements, respectively, was described there
as “COUNT 1 (Breach of Amendment No. 1 [AFA])”. Id. ¶ 22–26.
In short, in the Supplemental Complaint MFW sued the Plausteiners for compensatory
damages based on breach of the AFA, just as it does here, and that action was dismissed with
prejudice. Under the governing principles of res judicata, MFW’s suit here based on breach of
the AFA is, therefore, barred.
The Parties’ Arguments Based on the AFA
In light of the Court’s holding that res judicata bars this lawsuit, the Court does not have
occasion to firmly resolve the parties’ competing arguments for summary judgment based on the
AFA. As noted, MFW contends that the AFA makes the Plausteiners liable on the PRIF Loan,
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